If you are reading this article, I am glad that you are finally taking good decision which will save your family in unusual events. There are important factors that you can check in order to filter best term policy before jumping on to hit the pay button.
- Age
- Cover amount
- Claim settlement ratio & Amount
- Insurance company
Age:
What should be the perfect ideal age to select while picking term insurance? Term insurance will be acting like a money supplying engine in case of your absence. After kids were settled, it is okay even if our active income takes a hit. Ideally, if you are married by 30, your kids might have grown up and settled by when you are 60 or 65. If you want to add little buffer, pick 70. According to the personal factors, one might tune the age number. It is upto you but do your math beforing arriving at a digit.
Amount of cover:
Quite a few folks will struck at this step but no worries this amount of cover can be even changed later which is called lifestage benefit option. Life stage benefit option adds flexibility to your life insurance plan to accomodate your growing needs. Amount of cover should not be too low like 50 lakhs. It should not be like too high like 5 crores. You will be end up paying more premiums.
In general, 1-2 Crore would be ideal cover amount. While deciding the amount of cover, please understand the actual value of the cover after 30 years or 35 years term by calculating inflation. In simple terms, assuming average inflation of 5% over the span of 10 years.
1 Crore value in 2023 => 1 Crore
1 Crore value in 2033 => 50 lakhs
1 Crore value in 2043 => 25 lakhs
1 Crore value in 2053 => 12.5 lakhs
Hope the figures can give you enough clarity. Assuming inflation at 5% rate, I reduced the value of money by 5% each year, so typically 50% in 10 years and so on.
Whatever amount of cover you are picking now, think how that cover will be benefitted to your family after 30 years if something happens to you.
Claim Settlement ratio & Amount:
While selecting the insurance company, before going with the company which offers best low premium, know what is the claim settlement ratio of that company. So, it will signify out of every 100 claims, how many claims are passed by that insurer and how many are rejected.
Don’t you think insurance companies are even more smarter, they may pass all the claims with less amount of covers like 1 Cr or 2 Cr and reject the claims with high cover amount by showing some reason. With this thier claim settlement ratio may look promising but claim settlement amount may not. So, check the claim settlement amount as well of that insurance company before opting.
Insurance company:
Many might have question, which company should I select if above considered all the factors are almost same for X & Y companies and amount of premium may differ slightly. Definitely, choose the companies which has good brand value and trust among the people. Don’t go with the companies which are unkown because of attractive cheap premiums. Your family might have a hard time getting that claim amount later.
